Summary of this article
Promoter ownership is gradually declining, especially in mid and small caps
Domestic institutions emerging as dominant long-term market owners
FII flows turning selective, rotating beyond large-cap stocks
Retail ownership stagnates as markets become increasingly institutionalised
Control of corporate India is gradually moving away from concentrated promoter holdings and increasingly toward domestic institutional investors (DIIs), particularly mutual funds. According to a report titled Ownership Mosaic by Elara Capital, this transition marks a structural rebalancing of market ownership that is reshaping governance, liquidity, and market depth across segments.
For decades, promoters and foreign institutional investors (FIIs) were the defining forces in Indian markets. That equation is now changing. The report highlights that promoter holdings have been gradually declining across indices since FY 2023, with sharper dilution visible in mid- and small-cap companies than in large caps. “Easing promoter control is leading to improved free float and a broader institutional investor base,” the report notes.
This dilution is being absorbed largely by domestic institutions. As per the report, DII ownership has risen structurally across indices since FY20, with a noticeable acceleration after FY22. The trend is most visible in the NIFTY 50 and NIFTY 500, where domestic institutions are emerging as the dominant long-term capital base. “The growing presence of DIIs is improving market stability and depth,” the report observes, pointing out that their steady accumulation has partly offset promoter selling. The Nifty 50 index represents the largest 50 companies of the country, and the Nifty 500 index represents the largest 500 companies of the country.
Foreign investors, meanwhile, have become more tactical. FII holdings in large caps have moderated, with NIFTY 50 exposure easing from a peak of 28.3 per cent in FY 2021 to 25.5 per cent by December 2025, reflecting global risk aversion. However, as per the report, this does not signal a retreat from India altogether. Instead, FIIs have rotated into mid- and small-caps, where their holdings have risen to multi-year highs of 16.4 per cent and 14.2 per cent, respectively. According to the report, this suggests “selective positioning rather than broad-based allocation.”
The ownership transition is most pronounced beyond the large-cap space. Mid- and small-cap companies, traditionally dominated by promoters, are seeing a gradual shift toward institutional ownership. According to the report, these segments are witnessing improving liquidity and a more diversified shareholder base as institutions increase their presence.
At the same time, retail and public shareholding appear to have plateaued. After a surge during FY21–22, public ownership has largely stagnated or mildly declined post FY22. While public shareholding remains structurally higher in mid- and small-cap indices than in large caps, the report suggests that “market ownership is increasingly being driven by institutional rather than dispersed retail participation.”
Taken together, these shifts point to a market that is becoming more institutionalised. Promoters are slowly ceding ground, FIIs are turning more cyclical in their allocations, and domestic mutual funds are stepping in as steady, long-term owners of Indian equities. As the report notes, this evolving structure is laying the foundation for stronger governance standards and deeper markets, particularly in segments that were once tightly held.
